Rising adoption of electronic B2B payments technology has led to a populated market of FinTechs tackling the biggest challenges of vendor payments. While some points of friction are universal across the procure-to-pay landscape (paper checks, of course), the market’s current players often take a horizontal approach to B2B payments technologies — and can fail to address the unique needs of particular industries.
Noam Wolf, chief executive officer at restaurant industry management company MarketMan, told PYMNTS in a recent interview that it’s time the accounts payable space begins shifting its strategy toward a vertical approach to industry pain points.
MarketMan announced earlier this week that it is adding a vendor payment functionality within its platform, a natural evolution of an inventory management tool that now enables restaurant managers to order and pay for goods as inventory levels run low. Rather than partner with one of the many B2B payments FinTechs on the scene today, Wolf explained that MarketMan had to keep certain truths about the restaurant sector in mind when developing this tool.
For managers in this market, control, he said, is imperative to promoting digitization of supplier payments.
“As long as we keep control in managers’ hands — what they pay, what they don’t pay, and when they pay — restaurants are eager to move online payments,” he explained.
Like many sectors, restaurants today continue to rely on cutting and sending out paper checks to pay their vendors, which neither vendors nor restaurants particularly enjoy. Complicating matters is that often, the payment function occurs outside of any back-office portal a restaurant may be using (particularly if a restaurant has outsourced its bookkeeping function), leading to limited visibility and management of payment processes.
But unlike other sectors, restaurants have particular needs in their B2B payment processes — and according to Wolf, often times horizontally-positioned solutions won’t address them.
“There’s the need to short pay a vendor — this usually doesn’t exist in horizontal solutions,” he said, “because short pay is not common practice in many other industries.”
Restaurants need to be able to pay a portion of an invoice based on the goods they have actually received, rather than settle an entire invoice in one lump sum. And not only do they need to enable payment terms with vendors, but Wolf pointed to the sector’s needs in tracking cost-per-item, payment-per-item, price fluctuation-per-item and other metrics that may not be as important in other sectors, particularly those not dealing with perishable or seasonal produce.
On the flip side, industry-specific solutions also have to keep in mind what restaurants don’t need or want in their B2B payments technology.
For example, while MarketMan supports the use of commercial credit cards to pay vendors, many of the largest suppliers in the food services sector won’t accept cards thanks to interchange fees — thus prompting MarketMan to also support other payment methods like ACH, or to allow restaurants to choose who pays the card fees, buyer or supplier.
While restaurants want to embrace electronic B2B payments, what they don’t want is to have to give vendors their bank account information. Wolf said this is not only because restaurants don’t want to worry about erroneous or even fraudulent transactions, but also because managers want to retain control over payment processes, including when, how and how much they pay.
“They want to control the timing and pacing of the payment,” he explained. “The restaurant industry is a very cash flow-sensitive business. You want to keep control of timing when you pay.”
Overall, this shift toward ePayments in restaurants’ vendor payment processes is a change that will benefit both sides of the transaction. Wolf noted that suppliers are embracing this change in customer payment behavior as it promotes transparency, opening doors to opportunities like customer risk mitigation and financing. On the buyer side, the opportunities lie in retaining control of payments pacing without compromising flexibility and integration into existing back-office solutions.
Keeping these factors in mind, any B2B payments solution that wants to count restaurants as adopters must be able to accommodate these unique needs, because there is more to promoting adoption of digital vendor payments than simply nixing paper checks.
“I think the world is moving toward vertical solutions,” Wolf said, “where the entire workflow is managed in one system, from procure to pay.”